Don Moffat Little was an adviser at TD Waterhouse’s London , Ontario Branch.. On or about March 9, 2006, Mr. Little’s client, LJH, (who was at the time a widow with no close family and who was over the age of 90 years), gave Mr. Little a cheque, from her account at an unrelated bank, in the amount of $500,000 payable to him personally. He then liquidated securities in the client’s account in order to cover the cheque, and then deposited the cheque into his personal bank account without the knowledge or consent and contrary to the internal policies of TD Waterhouse.

An IDA hearing panel, using its extensive knowledge of psychology, concluded that there was no evidence of any victimization of the client as the evidence indicated the client had full command of her mental facilities at the time the gift was given. The client had signed a statutory declaration stating that she intended to make a substantial gift to Little and that she was not under duress or unduly influenced at the time she made the gift He was fined $15,000 and must pay costs in the amount to be fixed by the panel at a future date. As usual , he must also successfully complete the Conduct and Practices Handbook exam prior to any subsequent registration with an IDA member firm. TD Waterhouse had also required Little to reimburse the firm for the $45,000 in DSC fees, which had been charged to the client’s account resulting from his liquidation of her mutual funds and for which TD Waterhouse had repaid the client. To read more of this fantastic story visit http://www.ida.ca/RelatedDocuments_en.asp?ID=467

Toronto, May 15 - Kane and Kitana, two Rottweilers, will be outside in front of the Sutton Place Hotel located at 955 Bay Street between 11:40 am and 12:40 pm where Investment Dealers Association of Canada President Joe Oliver is speaking to the Canadian Club. The hounds signify small investor advocates determination to curtail the self-regulatory organizations (SRO) influence on the securities commissions whose mandate is to protect investors. At the demonstration there will be a sign on the sidewalk that says “Investor Watchdog”
The IDA has been likened to the fox guarding the henhouse for its role in enforcement. The SROs, securities commissions and RCMP address less than 5% of complaints received according to a report released by an independent analyst and three associations representing over 1 million seniors who have requested an inquiry on the malfunctioning securities system (see attachment). Thousands of investment advisors have serious complaints filed against them with the IDA which covered up the data, none of which it appears have been forwarded to the RCMP. It is widely believed the Ontario Securities Commission (OSC) with statutory authority to enforce the securities act “delegates,” without receiving or recording complaints, to the SROs which in turn stonewall until investors give up or have passed the recently reduced limitation period in court.

A report on the IDA by the OSC that was not made public by the regulator till it was ordered to years later found the IDA and its investigators were not addressing a growing backlog of investor complaints. "With the passage of time and the resources we'd need on the file, we decided to discontinue the judicial review we had under way," an OSC spokesperson said to the Toronto Star.

White collar securities crime and offences are rampant. Canada exhibits illegal insider trading before 63% of its acquisition announcements compared to 25% in the U.K., says a study by Measuredmarkets. “Insider trading goes on all the time, there's no real surveillance,” says Stephen Jarislowsky a money manager. Market Regulation Services Inc. is the SRO which monitors trading on the TSX. Mr. Oliver sits on its board whose directors like the IDA and OSC Commissioners all have ties to the investment industry.

Investor losses caused by white collar securities crime and excessive fund fees are estimated in the seniors report to be at least $18 billion annually. In an Investment Executive poll 79% responded “No” to the question, “Do securities regulators do a good job of protecting the interests of small investors?”

In response to the Investment Dealers Association, changing cloak, and seeking an increase in regulatory powers with which to “self-govern” the investment industry:

1. In 1999/2000 the OSC had an audit of the IDA carried out, which it tried valiantly to keep hidden, but after several court challenges, it finally gave in and allowed the public to see what independent experts were finding at the Investment Dealers Association. The audit found that at times IDA departments did not follow formal policies, were not complying with the terms of it’s recognition orders in several respects, and made recommendations on how the IDA should deal with the conflicts of interest inherent in being a lobby group for an industry, while simultaneously leading the public to believe they were an impartial and unbiased “self regulator”.

2. The enforcement side was particularly lacking: findings of a growing backlog of enforcement cases, no screening process for complaints, a bloated case review process. Further review found 48 areas where there was room for improvement. This from an agency that was (perhaps improperly) claiming status as Canada’s only national regulator of securities.

3. Then the Ontario government asked for input from industry members and the public. The Standing Committee on Finance and Economic Affairs in August of 2004, concluded after hearing dozens of tales from the industry, that there should be a review of the role of self regulators (the IDA) in the securities industry, as there is clearly a lack of faith in the integrity of self regulators (the IDA).

4. The IDA refuses to publicly state what self-regulatory status it holds under the securities Act, and prefers instead to mislead the public into believing that they have more authority than they in fact carry. This breach of trust creates an interesting opening for class action litigators who may in fact hold the IDA to the level of accountability they have been claiming. Whilst most decisions by the IDA have in fact served to dissuade investors who may have legitimate claims against investment dealers, and served to protect the investment dealers whom the association is named and funded by.

5. The IDA allows registrants and those who have “salesperson” title, and “registered representative” title and qualifications to misuse and mislead the public for marketing purposes and call themselves “advisor”, which denotes a totally different and distinct set of rules, requirements, and responsibilities to the public. IDA bulletin member regulation notice “MR0349" refers to officers and members of firms who call themselves a title that they are not in fact registered or entitled to call themselves. This is an illegal practice as outlined by IDA rules, securities law, not to mention common sense. The IDA looks the other way at this issue, despite it being pointed out to them repeatedly, as it’s members prefer to use titles that have a nicer, “feel” than using the titles of “salesperson”. Public disclosure be damned.

6. The IDA was named as suspect in the recent federal election “income trust insider trading” scandal, whereby Finance Minister at the time Ralph Goodale met with the IDA on the day of a positive announcement on income trust taxation, and within that same day, an increase in trading by IDA members set off investigation alarm bells. The results of this investigation are yet to be announced, but this factor alone would seem reason enough to revoke any self regulatory status granted to the IDA by provincial Securities Commissions.

7. Granting ANY powers of self regulation, to an industry group, is like handing the keys to the henhouse to a group of foxes. Not only will a single, national securities regulator render the current crop of 13 to 17 quasi regulators useless, but “clubs” like the IDA should and will be replaced by groups of investment client representatives who display a greater concern for the public interest than that of the current crop of clubs. They have a proven track record of industry leaning, industry supporting, self serving behavior and that is not in the public interest.

The ida wants greater powers?
The IDA should be under an RCMP investigation into insider trading by IDA members, based on inside information given to IDA members, by then finance minister Ralph Goodale. "Somebody", made a tremendous amount of trades, on the day of the positive news announcement on income trusts. Those trades were made through IDA members. Look for the results of the RCMP investigation to be released on the 12th. The 12th of never.

IDA finally admits to decades of conflict of interest, and misleading the public, when it splits apart its operation into two parts. One part is the lobby group and trade association that was the reason the IDA was started. The second part is the self regulator. For the twenty years I worked in the industry the IDA wanted (and got) it both ways. They were able to pretend a role of helpers and protectors of the public, while doing nothing to help or protect the public. The underlying motive for the IDA was to help and protect the industry. It is unfortunate for the hundreds, if not thousands of abused investors who trusted the system, and were referred to the IDA for help and protection, only to be misled once again, and told they had no case against the firm they complained of.

Most industry experts are starting to come to the realization that self regulation, in the hands of money and investment people, simply means that they write (or interpret) the rules in favor of the people in the industry, not in favor of the people they serve.

See John Lawrence Reynolds books, "FREE RIDER", or "THE NAKED INVESTOR", neither of which are works of fiction, to see examples of how poorly served and protected Canadians are when it comes to financial malfeasance. See "WALL STREET VERESES AMERICA", for further reading on how self regualtors use the rules to protect wall street from YOU. Not to protect you from wall street. The system is backwards. The system is flawed. The system is broken.

We need a single regulator, and effective regulator, an independant (from the industry) investor protective regulator. We do not need another self interested, self serving bunch of keystone cops, acting and posing as serving the public, when they are paid by industry, came from industry, or expect their next job to be back in the industry.

Ex Scotia man David Wilson, chair of the Ontario Securities Commission, cannot even find it possible to investigate income trusts, insider trading on same, or several other issues and cases where laws may have been broken. Reason. He worked in the business for so long that he has a conflict of interest on too many of the situations that come to his regulator (the OSC) that he has to pass on many of them. Imagine having to investigate income trusts that he himself was involved with when he was in the industry.

It is time to put these self serving, self regulators to bed. Once and for all. Time to stop pretending that a bunch of Bay Street types give a hoot about the reputation of the industry or the protection of the public. Follow the money, not the words. The record indicates that we expected too much when we put our hopes and our expectations on people who said "trust us", we can regulate ourselves. We were lied to. We were misled. We were duped.

If anyone, with any sense of the industry, actually considers giving the Investment Dealers Association, or whatever they are calling themselves, or posing as today, increased regulatory powers, it should be remembered that the Ontario Standing Committee on Finance and Economics, from August of 2004 recommendations was that the IDA itself should be investigated. That the IDA should be studied to determine if it was in fact acting as a regulator, and if it should be allowed to continue in this role.

I say no. Let the investigation begin before we listen to IDA talk of greater IDA powers.

The IDA is announcing plans to work toward investor restitution. In addition they seek to merge with other quasi-regulators in an effort to increase credibility and or to gain greater authority than they currently have.

To allow the IDA to continue to mislead the public, as well as provincial securities commission is a disservice to Canada in my opinion. Here is why I feel this way.

They have done very little for investors during the last two decades, and have done everything to represent the interests of the industry. They are, after all, a registered lobby group for the investment industry.

It is only in the last two or so years, that they IDA has been jolted into the 21st century by a more informed public, and this jolt has them making every change they can scramble to make in order to retain some degree of credibility. Too little, too late, too.

They have failed to admit and come to grips with the Income Trust insider trading problem that resulted after you met with then finance minister Ralph Goodale. That same day IDA members met with him, investment dealers (whom they represent) were responsible for large enough blocks of trades in these very investments to cause alarm bells to ring and accusations to fly. Where areIDA responsibilities to the public? Why are they claiming an authority of any kind, much less an ethical or moral authority to call themselves a regulator?

In a recent book "Wall Street vs America", the author states that, "self regulation has not protected the public from the investment industry, rather it has protected the investment industry from the public". I feel that the IDA has participated in this same misleading and misrepresenting behavior.

For example. The IDA refuses to answer the question of where its quasi regulator powers begin and where they end. I feel they have taken far too much authority, and gone beyond what the law (Securities Act) allows. The agency refuses to state clearly whether they have authority over the securities act, or just over membership issues. Both statements have come from the agency at various times. How can we as the public trust the IDA as a "regulator", when it refuses to speak cleanly and clearly on it's role, as well as it's authority?

The Ontario Standing Committee on Finance, clearly recognized the conflicts of interest in it's role as industry representative, and quasi regulator, and recommended that it's role in this area should be investigated. This investigation into the IDA is still required prior to any further moves by the IDA to gain power.

Combining people who have ability to manage or control money, with the ability to also write and review the rules about these practices is both foolish and outdated. Please recognize this and stop trying to "infiltrate" both areas now, despite IDA ability to change names or titles of your organization. IDA costume changes remind me of an old Vancouver stock market company practice of being a gold mine one day, and the next day claiming to be a biotech company, depending on the investment climate.

The practice of misinforming the public of a stated role of investor protection, while commonly representing the side and the interests of the industry has resulted in more than one complaint of violating the misleading advertising portions of the Competition Act. Industry Canada will not comment on an ongoing investigation, but this is something that also needs to be clearly explored during the investigation into the role of the IDA.

Other issues I have found when dealing with "self regulators", is the ability or the tendency to overlook some rules which may be in the interests of the public, while enforcing all rules which may be in the interests of the "self" part. An example of this selective overlooking of rules would be the simple "title inflation" that allows thousands upon thousands of registered investment salespersons in Canada to go about calling themselves "advisors". I understand from the IDA and the law (Securities Act) that this title is not approved unless full qualifications are met, and yet the IDA seems to look the other way, or to fail to explain properly why you allow this oversight to exist. How many other examples of "looking the other way" at member violations exsist, and what is the cost of misleading the public into thinking they are protected?

I apologize if I am under mistaken impressions on any of these topics. I have had twenty years experience under IDA, "self regulation", and at no time has the IDA found the time to answer these questions when posed to you. Please feel free to correct any misunderstandings I may be under.

I am writing to attempt to prevent financial injustice upon Canadians.

The injustice I seek to prevent is the attempt by the Investment Dealers Association of Canada to make cosmetic changes to it’s organization in an attempt to win further powers as a self regulator in the financial services industry.

I have found during a career in the financial services industry that the IDA has masqueraded as “a regulator with an interest in the protection of the public”, when in fact they have been no more than an industry trade association and lobby group, and their true interests have been to protect industry members. As recent as 2005, they have as much as admitted to this charge by agreeing to split apart their organization into an industry lobby group and a separate quasi regulator. This is a costume change in my opinion. They still refuse to answer public questions as to what quasi regulator status they actually have, verses what they represent to the public.

“Self-regulation doesn’t protect the public from Wall Street,” he writes. “It protects Wall Street from you.”

I found this all too true while I was in the industry for twenty years, and still find it to be the case, even while watching groups like the IDA go through costume change after costume change in an attempt to maintain their “cover”. This quote applies equally as well to Bay Street.

I found clear-cut examples of when the rules where more likely to be overlooked, or more likely to be enforced. They were more likely to be overlooked when the rule was in the protective interest of the public, and they were likely to be never overlooked when they were in the protective interest of the industry. As the industry is self-regulating, they report to no one, and answer to no one. Thus this ability to select which rules to enforce, and which to ignore works to create a perfect environment for abuse.

Given this propensity to succumb to human nature, it would be detrimental to the credibility of Canada’s financial services industry to take the risk of giving greater powers to those who have proven they are unable to handle the conflicts of interest. Please make a fresh start by creating investor protection based not on industry members dressing as protectors of the public. Please base protection of the public on qualified public interests, not on industry interests.

I ask you to do the right thing and open a new investor protection agency. One that is not funded, founded, or based on the people or the needs of the industry. That has proven to be a failure. It is time to establish this new investor protection agency without the continual conflicts of interest that the industry carries with it.

Please take the time to understand the crimes of conflict which have been brought on the public of Canada before you allow the IDA, or any of it’s partners, to infiltrate further into an area they have failed so miserably at.

I have learned a great deal since making my initial complaint about self-dealing practices such as double dipping, charging commissions on top of fee accounts, and or charging fees on top of commission accounts. I have since seen two account statements from separate retired people where they paid commission on investment products, only to be convinced later that a fee based account was in their best interest. The account was changed into fee based and they were dealt an additional cost, over and above what they had already paid. Why? In whose interest would this change be?

The one retired couple, when pointed out what had just occurred to them, said they were resigned to accept this kind of "financial abuse". When I asked them why, they replied that there is no use questioning such a large corporation. That is the feeling of those who know the risks of speaking out against the firms your association represents. An unfair, partial, and bullying response is what they expected. So they remained silent. I still have copies of their statements to prove the double dipping.

The other retired individual, whose account I have copy of, also was charged fees on top of commissions already paid, with no subsequent improvement or change in her investments, just an additional fee to the advisor. When I wrote in my complaint about this, the RBC response was mixed:

1) First RBC responded by saying that double dipping is a bad practice and that they "frown" on it.
2) Second RBC response was to point out that the fine print in the account opening documents clients sign allow such additional charges to be placed on accounts.
3) Third response was that if the client was given a discount, or a reduced fee on top of the already paid commission, then they were actually saving money.

The second retiree tells me that her response to her complaint (from the IDA, no less) was the third one. They made her feel like a fool for having complained. Told her that, in fact her advisor charged her an additional fee of less that he could have, and therefore, she was the beneficiary of his generosity. End of complaint. IDA bows out.

She could have pursued this complaint (as I hope you now will have the will to) but she also was resigned to the fact that the large corporation, as well as the carefully made up protective agency (IDA) would not be worth fighting with, as she was retired and did not have the emotional energy to engage them if they were unwilling to admit to wrongs of their salespersons.

My problem with the retired client who was charged at least twice, is that the IDA ignored the fact that a trusted investment firm claiming trusted advisor status with this person, just added an additional cost to this persons account, without adding any benefit to the client. This appears to me to be a clear violation of the Securities Act, in so many ways. To be specific, a violation of the portion of the act that states that each and every transaction must be for the benefit of the client. How could the IDA look the other way, and in fact participate in such a response to such an action?

I only hope that the changes now made at the IDA have ensured that this kind of "paid industry enforcer" behavior does not occur in future, and that your newly polished organization is now prepared to actually investigate the cases and the complaints that are brought to your attention. I copy this letter to some interested senators and others in media and government in hope of renewing an investigation into these double dipping allegations, and if necessary, investigation into the objectivity and benefit to the public interest of the IDA itself as a self regulatory agency. That is exactly what was called for by the Ontario Standing Committee on Finance and I look forward to an open and transparent investigative process of your organization.

Thank you for taking the time to assure myself and others, of the intentions and the actions that the IDA is willing to take in this matter. (double dipping complaint by RBC representatives and client examples of same discovered after leaving firm)

Below is a request for proper investigation into my original allegations of double dipping against RBC, as well as some industry relevant questions that have arisen from IDA actions since.
Now that the IDA has separated it's regulatory function from it's lobby association, I feel slightly more confident that an objective investigation may be made into a case of investment firm wrongdoing that I complained of originally. I have also had time to better understand the process by which you operate and the system, and I enclose additional questions as a result. I would appreciate it if your organization could respond to this inquiry and these questions.

The original complaint was given to you in 2002, and was handled at that time by a Steve Quinn. I felt it was not handled in proper manner for several reasons. I could be wrong on any of them, but I did have the feeling none-the-less.

First, my complaints to the Alberta Securities Commission about what I felt to be clear violations of several sections of the Securities Act, were seemingly ignored by the ASC, and the issue was referred to you, the IDA. I am told that is standard industry practice, but my reading and my research indicate to me that this practice may not be proper according to the securities act. I understand that provincial securities commissions are responsible for policing the securities act, and that the IDA responsibilities may be limited to capital requirements, registration requirements, and other areas of self-policing of IDA member behavior and standards.

Question # 1. Can the IDA tell me with any clarity; exactly what powers are granted to it, and what powers are not granted to it as a self-regulatory agency? I am unclear on where securities act violations should be directed, or complaints about investment people, or investment firms. Can you tell me when a provincial securities commission is responsible for a complaint, and when the IDA takes responsibility? I would appreciate a reply as simple and concise as possible for the benefit of public clarity on this matter. Although I worked in the industry for twenty years, it was never made clear to me.

Another assumption I made was that the IDA was industry funded, industry based and industry focused, and therefore was not the most appropriate or the most objective organization to make complaint to about the industry. I felt that the obvious conflict of interest in complaining about abuses to the association of your abuser would be easily recognized and professionally admitted by your association.

Question # 2 Can the IDA outline what steps have been taken to restore the credibility of the IDA as an impartial, unbiased, self regulatory agency, and specifically, how my complaint, (or other members of the public) against the industry will be handled in future? I am sure you are aware of a general feeling among the industry, that the IDA has acted in the past as a "paid enforcer" of the industry. I can point to several public cases where the IDA has appeared to acting more in this type of role, than in the role of protector of the public. Is there an independent, documented, professional process being now followed, or are files handled in a manner similar to the arbitrary, selective and haphazard manner that the Alberta Securities Commission practiced, as suggested by our auditor general in Alberta?

Question #3 I will repeat, and re-issue my complaint about RBC investment practices which were not in the spirit or the letter of the securities act to you, and ask that you undertake proper investigation into them at this time, instead of your previous response on the matter. I felt your previous response was to turn responsibility back on myself to do my own investigation and make the case for you, and that would be both difficult and illegal for me to access the internal records of RBC. I feel you can and should be doing the investigation yourself, in response to allegations of fraudulent or criminal activity. Again, I apologize if I am mistaken, but the IDA history of being both self regulator (without clearly defining these roles), and industry lobby group, has, as I am sure you will recognize, tainted your claims of objectivity in the past.

Question #4 What, if any, investigation was undertaken by the IDA into my allegations of double dipping and self dealing, and failure to follow codes, laws and practices, in effect failure to follow the spirit or the letter of the securities act when I made complaint about RBC practices. In general my complaints revolved around a firm that promises daily to the public that they will place "YOU FIRST", and from my position inside the firm I found this promise was somewhat empty when ethics and money making came into conflict (by some specific investment salespeople).

Question #5 Can the IDA clarify for me how it is legal for investment salespeople, who are registered as investment salespeople under the law of the Securities Act, and qualified as investment salespeople, to be able under IDA oversight, to advertise themselves as investment advisors, which I understand has a separate and distinct set of educational and experience requirements under the securities act that many of these (90% or more) simply do not meet? I notice my local Toyota dealership advertising that its salespersons are no longer called salespersons, but rather, "product advisors" for marketing reasons. Is there legal precedent to allow this same kind of "marketing label" to be made up for investment people, and is this allowed under the law? Is allowing a salesperson to misrepresent themselves allowed under the securities act. If this practice is not specifically allowed under the law, why would it be allowed under IDA supervision?

Question #6 Does the IDA participate in the Freedom Of Information Act, and if so, will they consent to release the files associated with this complaint, and evidence of any and all actions they have taken as a result of this complaint?

Question #7 What is the appeal process and how does one access it, in matters where the IDA has made a decision than a person feels should be handled more independently?

Thank you for taking the time to clear up some matters of public interest.
I look forward to you early reply.
Regards

The IDA is now in a marathon to re-capture any credibility they may have once had. It will be an uphill battle due to the record of failure by the IDA to walk the talk for so long. Below is a new release as evidence of the efforts of the organization to try and merge their way back into the game. The MFDA wisely declined a marraige proposal by the IDA, and now it seems they have finally found a partner.

In the post following I will copy a letter sent twice to the IDA for answers on legal and policy issues that they refuse to disucss so far. If they continue to refuse dialogue on issues of interest and importance to the public, they will unfortunately have to remain in the backwash. The only way for this organization to move forward is to address the wrongs of the past, admit them, and take whatever steps to correct them. It seems we all must do this at some time. I look forward to some honest admissions or at very least some credible answers from the IDA.

IDA and RS announce merger approval

New entity to provide stronger, streamlined regulation

Wednesday, April 26, 2006

By IE Staff

The Boards of Directors of the Investment Dealers Association of Canada and Market Regulation Services Inc. announced today that they have approved in principle a proposal to create a new self-regulatory organization to succeed the IDA and RS.

A joint-steering committee has been established by the IDA and RS — which will work closely with the relevant oversight bodies, Canadian securities administrators in particular, as well as capital markets stakeholders. The committee’s responsibility is to develop a detailed implementation plan for approval. The detailed merger plan will be subject to various regulatory approvals and by IDA membership and RS shareholders.

“The new organization will further strengthen self-regulation within the Canadian securities industry and enhance the already strong levels of investor protection and market integrity,” says Bill Moriarty, RS chairman.

The unified SRO will create greater clarity for investors and further improve regulatory effectiveness by eliminating duplication and gaps. The new entity will contribute to better coordination of policies and procedures for overall regulation. In addition, the improved capacity and single profile will allow it to attract and retain talent. It will also participate more effectively in domestic policy initiatives and help enhance the global status of the Canadian capital markets.

“Combining member and market regulation will enhance the quality of self regulation in Canadian markets,” says Brian Porter, past IDA chairman. “The initiative is timely, given the recent reorganization of the IDA, the review of the SRO structure by Canadian and U.S. securities regulators and the ongoing national discussion about the need to harmonize Canada’s regulatory system.”

The new entity would be expected to operate on a not-for-profit basis. Stakeholders would initially include all those currently regulated by the IDA or RS, as well as marketplaces that have contracted with RS for outsourced regulation services. The governance structure is intended to be sufficiently robust to facilitate a broader range of responsibilities for the new entity over time, should other industry groups choose to participate.

Re: Investment fraud and misrepresentation condoned by industry and regulators.

Now that the Nova Scotia court of appeal has confirmed that the provincial securities commission has not only the right, but the requirement to enforce the Securities Act of that province, it becomes clearer that what the Investment Dealers Association and other industry sponsored “self” regulators have been doing is either illegal, or at very least misrepresentation to the public.

What they have been doing for at least twenty years that I am aware of, is claming the status of a protector of the public, and an enforcer of securities law. The Provincial Securities Commissions have been complicit in this in that they have gone along with the deception as a matter of convenience. It has simply been easier for them to “delegate all matters” to the IDA, rather than to recall that the IDA simply does not have the power nor the mandate to enforce the law. There is no legal right for a securities commission to delegate legal matters of securities law to an industry lobby group. This is akin to the police delegating all crack dealing offenses to the Hells Angels.

The IDA is what I might call a “paid enforcer” for the industry. They are registered in Ottawa as a lobbyist for the Investment Dealers they represent. For them to claim any for of regulatory status with regard to public protection is deceiving, as they are pretending to serve two masters at the same time.

Now (as recent as December 2005) the IDA is starting to admit to the serving of two masters, and has voted to split into two parts. One part as self-regulator, and a second part as the industry trade and lobby group. Time will tell if this move is sincere, or simply another change of costume for this organization.

Saskatchewan Financial Securities Commission has also recently come out with a decision recognizing the impropriety of many of the powers that the IDA assumed, or claimed. Maybe things will get better for members of the public.

But what of all the damaged, defrauded, or financially abused members of the Canadian public who have made the effort to complain in the last twenty years? Where do they get a fair hearing for the wrongs done them? In the past, (and perhaps today still) if they wrote to a provincial securities commission about bad investment practices at an IDA member firm, the securities commission referred the complaint directly to the IDA to investigate. Not that they had the legal authority to do so, but it seemingly was a matter of greater convenience to the provincial commissions. It would be like complaining of abuse, and being referred to the very group who abused you to seek a fair hearing. The conflicts of interest are huge. The legal ramifications of each commission dropping their responsibility for the law (Securities Act) are bigger.

Will there be civil actions? Should anyone who has complained to a provincial securities commission on a matter pertaining to an IDA firm protest? Or should the IDA have it’s day in criminal court and be held to the standards of the public officials that they pretend they are. Should criminal breach of trust (section 122) be considered for the duplicity and misrepresentation they have dealt in for years. Does breach of trust apply to the provincial securities commissions for looking the other way when charged with enforcing the law? I feel all of the above should be considered based on the history of financial violence the industry has wrought in the name of profits. The competition Act protects the public from misrepresentation. Perhaps the Competition Bureau will take the time to investigate.

I look for an open, honest airing of the issue, and for the provincial securities commissions to immediately cease improper delegation of the Securities Act to industry sponsored, industry paid, and industry leaning organizations of all stripe, and to start enforcing the Securities Act, rather than ignoring it.

I am Larry Elford, and I worked in the industry for twenty years. I earned the designations, CFP, CIM, FCSI, Associate Portfolio Manager, as well as the angst of several of my industry colleagues for my views about putting clients interests first. For more reading on this topic visit, www.investoradvocates.ca or www.investorvoice.ca

In a decision that sets a precedent in Canada, the Nova Scotia Court of Appeal has ruled that the province’s securities commission has as much authority to investigate and discipline a member of the Mutual Fund Dealers Association as does the MFDA itself.

“To the best of my knowledge, this is the first time a court of appeal in Canada has dealt with the question of exclusivity of jurisdiction of a self-regulatory organization,” says Nick Pittas, director of the Nova Scotia Securities Commission in Halifax.

For financial advisors, the court ruling means at least two organizations have the legal authority to take action at the same time against an individual who is alleged to have broken the rules of his or her SRO, whether the SRO is the MFDA or the Investment Dealers Association of Canada.

Jeff Kehoe, director of enforcement litigation at the IDA, notes that while the decision doesn’t change anything, “It reinforces the commission’s power.”

At issue in the case before the appeal court were the activities of Bruce Schriver, a registered salesperson who worked for Select Money Strategies Inc. , a member of the MFDA. Schriver was alleged to have entered into a referral arrangement with Portus Alternative Asset Management Inc. unbeknownst to Select. Doing this type of work on the side is contrary to MFDA rules.

NSSC staff argued that by breaking MFDA rules, Schriver also breached the Nova Scotia Securities Act, so the commission moved to take action. Schriver blocked that action by claiming the commission did not have the authority to determine whether he had contravened the MFDA’s rules. He contended only the MFDA could do that. He could not, however, find a court that agreed with him.

For its part, the Nova Scotia Court of Appeal found that the NSSC was not seeking to enforce the rules of another organization, specifically the MFDA, but rather its own.

And duplication was a moot point in this case. Only the NSSC was investigating Schriver. “There was nothing going on on the SRO side,” says Pittas. “The court case was a legal effort to avoid our proceedings. It failed.”

The court, however, went beyond looking at just one question. It also explored two related issues, and made significant determinations. First, the Court of Appeal reversed a lower court’s finding and determined that the “standard of review,” a legal term that describes the extent to which an organization or individual should be held accountable, is “reasonableness” not “correctness.”

Correctness is the harder standard to meet.

This means the NSSC only has to show that a decision it makes is reasonable. It does not have to demonstrate that the decision is right.

This has significant ramifications, says Pittas, because it shows the level of deference that should be paid to the commission. Nova Scotia Appeal Court Justice Thomas Cromwell clearly spelled out in his decision just how deferential the courts should be: “The Supreme Court of Canada has consistently recognized the considerable expertise of securities commissions. And, given the broad policy context within which securities commissions operate, courts have been held to have less expertise relative to the commissions in determining what is in the public interest in the regulation of financial markets and in interpreting their constituent statutes.”

The second issue dealt with an argument by Schriver that because a recognition order had been granted to the MFDA by the commission under the securities act, this constituted an implied delegation of authority to the MFDA. Not so, said the court. Any such delegation, it found, must be an express delegation in writing.

“This hasn’t been done in any jurisdiction in Canada,” says Pittas. “No securities commission has delegated any of its enforcement powers.”

Nor is that likely to happen.

And it appears to be business as usual. In Nova Scotia, the winding legal road has at last come to an end. Now the securities commission must return to where the journey began: investigating the allegations against Schriver.

“The matter will have to be brought back for a hearing,” Pittas says.

That process is just fine by the MFDA. “The securities commissions always retain and will always retain their legal authority to deal with issues directly,” says Shaun Devlin, vice president of enforcement at the MFDA.

The IDA holds the same viewpoint. “The commissions all have the statutory power to do exactly what we do, but they have allowed us to do a lot of the front-line work,” says Kehoe.

“There is truly overlap in jurisdiction,” he adds. “We recognize that, but we complement one another.”

They also work well together, which is why there is little duplication of effort or butting of heads. “As a practical matter, not every issue is going to give rise to dual proceedings,” says Pittas, adding that the statutory regulator will have to consider whether it needs to act if there is already a pending proceeding or investigation underway by an SRO.

Indeed, according to Devlin, the organizations are adept at co-ordinating activities: “We work closely with commission staff. On some occasions, we both review a case, but this is the rare exception.” IE

(advocate comments............In this story, the misdirection that the IDA is using is that they "complement one another". In practice, I have found the IDA to be the paid enforcers of the industry. They have been willing to look the other way at investment practices that seriously hurt investors.

It is no wonder, when you recognize that they are a trade organization and lobby group for the industry. They are paid by the industry. Staffed from the industry. They may claim they serve two masters well, but I claim that they serve the master with the money and only pretend to serve the other.
I am gratified to see provincial securities commissions finally coming to recognize IDA failure to be impartial, and starting to take away some of the powers that they never should have had to begin with)

I have learned a great deal since making my initial complaint about self-dealing practices such as double dipping, charging commissions on top of fee accounts, and or charging fees on top of commission accounts. I have since seen two account statements from separate retired people where they paid commission on investment products, only to be convinced later that a fee based account was in their best interest. The account was changed into fee based and they were dealt an additional cost, over and above what they had already paid. Why? In whose interest would this change be?

The one retired couple, when pointed out what had just occurred to them, said they were resigned to accept this kind of "financial abuse". When I asked them why, they replied that there is no use questioning such a large corporation. That is the feeling of those who know the risks of speaking out against the firms your association represents. An unfair, partial, and bullying response is what they expected. So they remained silent. I still have copies of their statements to prove the double dipping.

The other retired individual, whose account I have copy of, also was charged fees on top of commissions already paid, with no subsequent improvement or change in her investments, just an additional fee to the advisor. When I wrote in my complaint about this, the RBC response was mixed:

1) First RBC responded by saying that double dipping is a bad practice and that they "frown" on it.
2) Second RBC response was to point out that the fine print in the account opening documents clients sign allow such additional charges to be placed on accounts.
3) Third response was that if the client was given a discount, or a reduced fee on top of the already paid commission, then they were actually saving money.

The second retiree tells me that her response to her complaint (from the IDA, no less) was the third one. They made her feel like a fool for having complained. Told her that, in fact her advisor charged her an additional fee of less that he could have, and therefore, she was the beneficiary of his generosity. End of complaint. IDA bows out.

She could have pursued this complaint (as I hope you now will have the will to) but she also was resigned to the fact that the large corporation, as well as the carefully made up protective agency (IDA) would not be worth fighting with, as she was retired and did not have the emotional energy to engage them if they were unwilling to admit to wrongs of their salespersons.

My problem with the retired client who was charged at least twice, is that the IDA ignored the fact that a trusted investment firm claiming trusted advisor status with this person, just added an additional cost to this persons account, without adding any benefit to the client. This appears to me to be a clear violation of the Securities Act, in so many ways. To be specific, a violation of the portion of the act that states that each and every transaction must be for the benefit of the client. How could the IDA look the other way, and in fact participate in such a response to such an action?

I only hope that the changes now made at the IDA have ensured that this kind of "paid industry enforcer" behavior does not occur in future, and that your newly polished organization is now prepared to actually investigate the cases and the complaints that are brought to your attention. I copy this letter to some interested senators and others in media and government in hope of renewing an investigation into these double dipping allegations, and if necessary, investigation into the objectivity and benefit to the public interest of the IDA itself as a self regulatory agency. That is exactly what was called for by the Ontario Standing Committee on Finance and I look forward to an open and transparent investigative process of your organization.

Thank you for taking the time to assure myself and others, of the intentions and the actions that the IDA is willing to take in this matter. (double dipping complaint by RBC representatives and client examples of same discovered after leaving firm)

Below is a request for proper investigation into my original allegations of double dipping against RBC, as well as some industry relevant questions that have arisen from IDA actions since.
Now that the IDA has separated it's regulatory function from it's lobby association, I feel slightly more confident that an objective investigation may be made into a case of investment firm wrongdoing that I complained of originally. I have also had time to better understand the process by which you operate and the system, and I enclose additional questions as a result. I would appreciate it if your organization could respond to this inquiry and these questions.

The original complaint was given to you in 2002, and was handled at that time by a Steve Quinn. I felt it was not handled in proper manner for several reasons. I could be wrong on any of them, but I did have the feeling none-the-less.

First, my complaints to the Alberta Securities Commission about what I felt to be clear violations of several sections of the Securities Act, were seemingly ignored by the ASC, and the issue was referred to you, the IDA. I am told that is standard industry practice, but my reading and my research indicate to me that this practice may not be proper according to the securities act. I understand that provincial securities commissions are responsible for policing the securities act, and that the IDA responsibilities may be limited to capital requirements, registration requirements, and other areas of self-policing of IDA member behavior and standards.

Question # 1. Can the IDA tell me with any clarity; exactly what powers are granted to it, and what powers are not granted to it as a self-regulatory agency? I am unclear on where securities act violations should be directed, or complaints about investment people, or investment firms. Can you tell me when a provincial securities commission is responsible for a complaint, and when the IDA takes responsibility? I would appreciate a reply as simple and concise as possible for the benefit of public clarity on this matter. Although I worked in the industry for twenty years, it was never made clear to me.

Another assumption I made was that the IDA was industry funded, industry based and industry focused, and therefore was not the most appropriate or the most objective organization to make complaint to about the industry. I felt that the obvious conflict of interest in complaining about abuses to the association of your abuser would be easily recognized and professionally admitted by your association.

Question # 2 Can the IDA outline what steps have been taken to restore the credibility of the IDA as an impartial, unbiased, self regulatory agency, and specifically, how my complaint, (or other members of the public) against the industry will be handled in future? I am sure you are aware of a general feeling among the industry, that the IDA has acted in the past as a "paid enforcer" of the industry. I can point to several public cases where the IDA has appeared to acting more in this type of role, than in the role of protector of the public. Is there an independent, documented, professional process being now followed, or are files handled in a manner similar to the arbitrary, selective and haphazard manner that the Alberta Securities Commission practiced, as suggested by our auditor general in Alberta?

Question #3 I will repeat, and re-issue my complaint about RBC investment practices which were not in the spirit or the letter of the securities act to you, and ask that you undertake proper investigation into them at this time, instead of your previous response on the matter. I felt your previous response was to turn responsibility back on myself to do my own investigation and make the case for you, and that would be both difficult and illegal for me to access the internal records of RBC. I feel you can and should be doing the investigation yourself, in response to allegations of fraudulent or criminal activity. Again, I apologize if I am mistaken, but the IDA history of being both self regulator (without clearly defining these roles), and industry lobby group, has, as I am sure you will recognize, tainted your claims of objectivity in the past.

Question #4 What, if any, investigation was undertaken by the IDA into my allegations of double dipping and self dealing, and failure to follow codes, laws and practices, in effect failure to follow the spirit or the letter of the securities act when I made complaint about RBC practices. In general my complaints revolved around a firm that promises daily to the public that they will place "YOU FIRST", and from my position inside the firm I found this promise was somewhat empty when ethics and money making came into conflict (by some specific investment salespeople).

Question #5 Can the IDA clarify for me how it is legal for investment salespeople, who are registered as investment salespeople under the law of the Securities Act, and qualified as investment salespeople, to be able under IDA oversight, to advertise themselves as investment advisors, which I understand has a separate and distinct set of educational and experience requirements under the securities act that many of these (90% or more) simply do not meet? I notice my local Toyota dealership advertising that its salespersons are no longer called salespersons, but rather, "product advisors" for marketing reasons. Is there legal precedent to allow this same kind of "marketing label" to be made up for investment people, and is this allowed under the law? Is allowing a salesperson to misrepresent themselves allowed under the securities act. If this practice is not specifically allowed under the law, why would it be allowed under IDA supervision?

Question #6 Does the IDA participate in the Freedom Of Information Act, and if so, will they consent to release the files associated with this complaint, and evidence of any and all actions they have taken as a result of this complaint?

Question #7 What is the appeal process and how does one access it, in matters where the IDA has made a decision than a person feels should be handled more independently?

Thank you for taking the time to clear up some matters of public interest.
I look forward to you early reply.
Regards

I am writing today to express my disappointment in your government’s failure to date in implementing most of the recommendations of the Ontario Standing Committee on Finance and Economic Affairs from the Five Year Review of the Ontario Securities Act that are attached below. Since October 18, 2004, white collar crime has accelerated and we have a pending $20 billion calamity in income trusts and income mutual funds, caused by financial reporting and marketing abuses, that is not receiving any urgent remedies or sanctions. There has been no published criticism of the Accountability Research Report entitled “The Worst is Yet to Come: The $20 Billion Deception that Dwarfs the Tax Debate.” This report’s findings on deceptions in cash yield and the unsustainability of most income trusts have been subsequently confirmed by Standard and Poors and Strategic Analysis Corporation.

David Wilson, new Chairman of the OSC and former C.E.O of Scotia Capital, may be concerned about his own reputation and civil liability associated with Scotia Capital’s co-lead in one third of the business income trusts and participation in two thirds of the syndicates for these deceptive products sold to seniors and other income seeking investors. I also know the Investment Dealers Association has been neutered and spayed by the February 6, 2006 decision of William F. Ready, Q.C., Commissioner of the Saskatchewan Financial Services Commission that “the IDA has no authority to regulate former members or former approved persons either under its bylaws or in contract, it has no jurisdiction.”

It is particularly disappointing that your government’s efforts to gain support for a single national securities commission are through the Crawford Panel, which is a private sector committee funded by Ontario government taxpayers. Yet, the Crawford Panel has no Ontario Government officials on it, no individual investor representatives and no policing expertise. The proposed single commission structure has the same fundamental defect of ill-perceived industry funding and no accountability to the public for the integrity and effectiveness of its investor protection mandate. We are well past the one year period for initiating the separation of the OSC policing and adjudication function, that was recommended by Honourable Coulter Osborne, the Ontario Ethics Commissioner, and supported by all the parties in the Ontario Legislature.

I ask you to convene an urgent hearing by the Ontario Standing Committee on Finance and Economic Affairs on the two subjects of:

(a) immediate solutions for fixing the deceptive cash yields being marketed by income trusts and their investment bankers to our least sophisticated, most trusting and most financially vulnerable Ontario residents, our seniors.

(b) immediate changes in Ontario securities laws and OSC procedures to address the new Saskatchewan Financial Services Commission decision that the IDA has no authority to regulate former members or former approved persons, which makes the current OSC delegation of complaints from individuals for investor losses caused by industry personnel malfeasance a breach of trust.

Yours sincerely,

Diane A. Urquhart
Mississauga, Ontario

CC: All Ontario Members of Parliament

Ontario Standing Committee
on Finance and Economic Affairs
5 Year Review of the Ontario Securities Act

On October 18, 2004, the Standing Committee on Finance and Economic Affairs (the "Standing Committee") tabled in the Legislative Assembly of Ontario its "Report on the Five Year Review of the Securities Act." This report follows public hearings that the Standing Committee held in August 2004 as part of its review of the Five Year Review Committee Final Report: Reviewing the Securities Act, tabled in the Ontario legislature in May 2003. In this latter report, the Five Year Review Committee, chaired by Purdy Crawford, Q.C., made 95 recommendations dealing with many aspects of securities regulation in Ontario.

The Standing Committee's unanimous report contains the following 14 recommendations.

1 The next review committee should be struck in May 2007. The committee should deliver an interim report by May 2008 and a final report by early 2009. Thereafter, a review committee should be appointed four years after the date of the establishment of the previous committee. This recommendation is in no way intended to discourage or preclude the Minister of Finance from initiating reviews of individual issues, as necessary.
2 The Standing Committee recognizes the critical need for a single securities regulator, and strongly recommends that the Ontario government continue to work with all stakeholders, including Ministers in other provinces, toward the development of a single securities regulator. The key elements of the new regulatory system should be one new regulator, one common body of securities law and one set of fees. X Crawford Panel has no Ontario government representatives, no individual investor representatives and no policing expertise. The panel does not propose accountability to the public for the integrity and effectiveness of its investor protection laws and enforcement.
3 The government should introduce securities transfer legislation modelled on revised Article 8 of the Uniform Commercial Code in the United States. √
4 The Standing Committee believes that the status quo is unacceptable, and recommends that the government initiate a review of the Legislature’s oversight of the Ontario Securities Commission. Any new oversight mechanism should include a requirement that the annual reports of the Commission be automatically referred to a Committee of the Legislature, and should ensure that the Committee has the ability to compel witnesses to appear before it, including the responsible minister, to answer questions regarding progress in implementing recommendations approved by the Legislature. X
5 The adjudicative function of the Ontario Securities Commission should be separated from its other functions, based on the recommendations of the Fairness Committee. X
6 The Ontario Securities Commission should not be given basket rulemaking authority. √
7 The Ontario Securities Commission should not be given power to issue blanket rulings and orders; however, the Standing Committee recognizes that the Commission needs to be able to act in a timely manner and asks the government to study alternative mechanisms that would enhance efficiency, without sacrificing investor protection. √
8 The government should closely monitor the implementation of Recommendation 28 of the Crawford Report (page 102), and should ask the Ontario Securities Commission to report on the progress in implementation in its annual report to the Legislature. X
9 The government should establish a task force to review the role of SROs, including whether the trade association and regulatory functions of SROs should be separated. X
10 The government should reintroduce the relevant provisions of the former Bill 41, and proclaim the civil liability provisions of Bill 198. √
11 The Ontario Securities Commission should be given rulemaking authority over corporate governance matters generally, as recommended in Recommendation 61 of the Crawford Report (page 174). √

12 The government should introduce legislation to amend the proxy solicitation rules in Ontario’s corporate and securities laws, as recommended in Recommendation 62 of the Crawford Report (page 180).

13 The Ontario Securities Commission and the CSA should require publicly offered mutual funds to establish and maintain an independent governance body that provides for substantial investor protection. X
14 The Standing Committee recommends that the government work with the Ontario Securities Commission to establish a workable mechanism that would allow investors to pursue restitution in a timely and affordable manner and that the government report on its progress in this regard within 12 months. This work should take into account any measures to separate the adjudicative function of the Commission. X

Nearly 18 months ago I, as a citizen of Alberta and as past securities industry participant, was invited to provide evidence before the Ontario Standing Committee on Finance and Economic Affairs (the “Finance Committee”) with respect to securities regulation

My brief presentation, should you choose to review it, is located on the government web site at the following address;

What flowed from the two-day hearings was a resounding and undeniable message from your constituents that the securities regulatory regime was an abysmal failure and that the root of the problem was the self-regulatory organizations.

Subsequently, the Finance Committee recommended a task force be created to perform a review of the self-regulatory organizations. The resulting wording of the recommendation within the Report on the Five Year Review of the Securities Act is as follows:

The testimony received by the Standing Committee revealed a deep-seated skepticism on the part of the investing public. They simply are not confident that complaints will always be handled in an objective manner under a system of self-regulation.

Further that

We believe the question of whether SROs should be given more powers or, indeed, whether they should have any powers at all, should be the subject of further review by a task force established to examine this specific issue.

You might think that living in western Canada might give me a different perspective on the SROs, in particular the Investment Dealers Association (“IDA”), well perhaps it does. In the end however the conclusion arrived at by Albertan retail investors is no different than Ontarian retail investors. As I said in my presentation;

I believe that the Investment Dealers Association should be eliminated from any role whatsoever of a self-regulatory nature. They are an industry trade association and, as such, they are interested in the benefits and the protection of their members. They are, in my opinion, equivalent to allowing the foxes to watch the henhouse and they're not doing the job of protecting or compensating the public -- to see the mandate of the IDA written is “to protect investors” -- and based on my 20 years in the industry, I find that sad.

The IDA is a private industry lobby group and trade association (club) which has been for some years misleading and masquerading as a regulatory body, at considerable harm to the public, in my experience.

The Ontario Securities Commission has improperly delegated securities law matters to this private club of investment dealers for years and that, I believe, is an assault on the trust the public has placed in government. I believe this assault on the public trust could fall under section 22 of the criminal code for public officials, “breach of trust”.

The IDA may be able to police their membership, their capital requirements and their behavior, but they should not be allowed to administer a parallel, and let me add the terms inferior and self serving, system of regulation thrust upon the public. They have been wrongly allowed to do this by rather nearsighted provincial regulators, and it is apparent that what we have received is self-interest and not self-regulation. This must be clarified and stopped if my assumptions are correct.

Again, one only has to look to the west to see the Saskatchewan Financial Services Commission (“SFSC”), clearly delineating the boundaries of the authority of the IDA. The SFSC ruled last month that the IDA has no authority/jurisdiction to go after a broker once the broker has left the club.

Here is an excerpt from the decision;

“Since the IDA has no authority to regulate former members or former approved persons either under its bylaws or in contract, it has no jurisdiction.” - William F. Ready, Q.C., Commissioner

That means, exactly what investors have been saying for 10 years, that the IDA has been misleading the public by issuing hollow orders claiming disgorgements of ill gotten gains, million dollar fines and demanding payment of “court” costs to appease those who have been financially raped, saying how ‘look how serious we are’ in protecting the public – when we know that they can’t – nor should they be allowed to pretend any further that they can.

The IDA has repeatedly misinformed the public that they represent the public interest. The Competition Act should be a strong deterrent for this type of misrepresentation and I have asked that they look into this. Copies of correspondence with Industry Canada are available at www.investoradvocates.ca

The Ontario capital markets are too important to permit an industry club to protect investors when they are the ones with the greatest potential to profit from a breakdown in that protection. The conflicts are too great, the money is too tempting and the results are too well known to allow this to continue.

It is too late to restore credibility to this organization. They have served themselves, time and again, and the public be damned. Whether the IDA “separates” its lobby function from its member regulatory function or not will not help investors.

I look forward to hearing from you at your earliest convenience, and I look forward to your promise of an inquiry (“review”) into the Investment Dealers Association.

Briefly describe the organization's business or activities
OUR DUAL ROLES AS AN INDUSTRY REGULATOR & TRADE ASSOCIATION ARE COMPLEMENTARY. AS THE NATIONAL SELF-REGULATORY ORGANIZATION OF THE CDN SECURITIES INDUSTRY, THE IDA MONITORS MEMBER FIRMS FROM COAST TO COAST IN TERMS OF BOTH THEIR CAPITAL ADEQUACY & CONDUCT OF BUSINESS. THE QUALIFYING, REGISTERING, COMPLIANCE AND DISCIPLINARY PROCESSES OF THESE FIRMS ALSO IS OUR RESPONSIBILITY. INVESTOR PROTECTION IS A TOP PRIORITY FOR US AS IT IS FOR THE MONTREAL, TORONTO, ALBERTA, & VANCOUVER STOCK EXCHANGES WHICH ALSO MONITOR SOME MEMBER FIRMS IN THEIR RESPECTIVE REGIONS. HOWEVER, AS THE COUNTRY'S ONLY NATIONAL SRO, THE IDA HAS AN ADDITIONAL RESPONSIBILITY TO LISTEN TO THE VIEWS OF PEOPLE IN ALL PARTS OF THE COUNTRY, & TO ENSURE THESE VARIOUS PERSPECTIVES ARE TAKEN INTO ACCOUNT WHEN FORMULATING NATIONAL POLICIES & RULES GOVERNING INDUSTRY PRACTICES & STANDARDS. THIS NATIONAL SELF-REGULATORY FUNCTION OBVIOUSLY CONTRIBUTES TO OUR EFFECTIVENESS AS A TRADE ASSOCIATION DURING ADVOCACY WORK ON BEHALF OF THE SECURITIES INDUSTRY. FROM THE UNCOMMON VIEWPOINT OF REGULATORY RESPONSIBILITY & EXPERIENCE, WE ARE ABLE TO BRING FORWARD CONSTRUCTIVE RECOMMENTATIONS TO THE FEDERAL & PROVINCIAL GOVERNMENTS ON A WIDE RANGE OF POLICY ISSUES THAT IMPACT THE BROADER PUBLIC GOOD.
Briefly describe the organization's membership or classes of membership
ONLY ONE CLASS - FULLY PARTICIPATING (VOTING) MEMBER. ALL MEMBERS ARE PROVINCIALLY REGISTERED AS "INVESTMENT DEALERS".

E. Subject-matters: Particulars
Retrospective:
ON-GOING BRIEFINGS WITH THE DEPARTMENT OF FINANCE ON CROSS-BORDER REGULATORY ISSUES. ASSIST FINANCE IN CONVEYING THE INDUSTRY POSITION ON SECURITIES MARKET ACCESS IN DEVELOPED COUNTRIES IN CONTEXT OF BILATERAL TRADE AGREEMENTS (E.G. COMMENT ON CHINA'S APPLICATION FOR WTO STATUS). ON-GOING DISCUSSIONS WITH DEPARTMENT OF FINANCE REPRESENTAIVES ON LEGISLATION TO EXPAND ACCESS TO THE CANADIAN PAYMENTS SYSTEM. PRE-BUDGET CONSULTATIONS WITH THE DEPARTMENT OF FINANCE. DISCUSSION WITH DEPARTMENT OF FINANCE ON PROBLEMS WITH RSP ELIGIBILITY OF CERTAIN SECURITIES. BANKING & FINANCE-DISCUSS WITH THE BANK OF CANADA AND THE DEPARTMENT OF FINANCE THE IDA STRIP BOND COMMITTEE'S RECOMMENDATIONS FOR STRIPPING AND RECONSTITUTION OF GOVERNMENT OF CANADA BONDS. COORDINATE WITH BANK OF CANADA AND FINANCE ON RESPONSE TO CSA PROPOSALS FOR DEBT MARKETS. BRIEF DEPARTMENT OF FINANCE AND BANK OF CANADA ON INDUSTRY POSITION ON THE MULTI JURISDICTIONAL DISCLOSURE SYSTEM (MJDS) TO ASSIST FINANCE IN DIRECT REPRESENTATION TO THE US SECURITIES AND EXCHANGE COMMISSION AND THE US DEPARTMENT OF TREASURY. SEMI-ANNUAL MEETINGS WITH BANK AND FINANCE OFFICIALS TO DISCUSS MONETARY POLICY & CAPITAL MARKET ACTIVITIES. BANK OF CANADA-PARTICIPATED IN PRESENTATION ON DEVLEOPING A PRE-SETTLEMENT NETTING SYSTEM TO THE CANADIAN FIXED INCOME MARKETS. WORKED WITH THE BANK TO ADMINISTER A NEW POSITION REPORT TEST IN MARCH PURSUANT TO IDA POLICY #5-CODE OF CONDUST FOR DEALING IN DOMESTIC DEBT MARKETS. RECOMMENDATIONS TO BANK OF CANADA TO ESTABLISH A FORMALIZED TIMEFRAME FOR ANNOUNCING CHANGES IN MONETARY POLICY. REPRESENTATIONS TO THE BANK OF CANADA ON IMPROVEMENTS TO THE CANADA TREASURY BILL AUCTION PROCESS. DISCUSSIONS WITH BANK OF CANADA REQUEST FOR COMMENT ON THE VIABILITY OF THE DAILY MONEY MARKET SURVEY. CONSULTATIONS WITH BANK OF CANADA ON THE DEVELOPMENT AND IMPLEMENTATION OF IDA POLICY #7-CODE OF CONDUCT FOR DEALING IN REPO MARKETS.
Prospective:
RUN THROUGH THE EXERCISE OF PRE-BUDGET CONSULTATIONS WITH THE DEPARTMENT OF FINANCE AND SENATE BANKING COMMITTEE. CONTINUE TO BRIEF THE DEPARTMENT OF FINANCE ON CROSS-BORDER ISSUES. MEET SEMI-ANNUALLY WITH THE BANK AND FINANCE TO DISCUSS MONETARY POLICY AND CAPITAL MARKET ACTIVITIES. PARTICIPATE IN ANY BANK OF CANADA ECONOMIC SURVEYS. CONTINUE TO KEEP THE BANK OF CANADA INFORMED OF THE PROGRESS TOWARDS THE IMPLEMENTATION OF A PRE-SETTLEMENT NETTING SYSTEM FOR THE FIXED INCOME MARKETS. WORK WITH THE BANK TO RUN A SECOND TEST OF THE NET POSITION REPORT TO EVALUATE THE IMPROVEMENTS MADE SINCE THE FIRST TEST. KEEP MONITORING THE AUCTION PROCESS AND DISCUSS WITH THE BANK ANY IMPROVEMENTS THAT COULD BE MADE.

As you are aware, I have contacted your office on a number of occasions since you last agreed to create a task force to perform a government review of the Investment Dealers Association of Canada (“IDA”). As you may recall, this was a strong and unanimous recommendation from the Standing Committee on Finance and Economic Affairs and is found at page 21, paragraph 26 of the Report on the Five Year Review of the Securities Act.

The actual wording in the report is as follows:

The testimony received by the Standing Committee revealed a deep-seated skepticism on the part of the investing public. They simply are not confident that complaints will always be handled in an objective manner under a system of self-regulation.

Further that

We believe the question of whether SROs should be given more powers or, indeed, whether they should have any powers at all, should be the subject of further review by a task force established to examine this specific issue.

On November 1st, 2004, as minister responsible for the administration of the Ontario Securities Act, you stated before the Ontario Legislative Assembly:

The committee recommended the government establish a task force to review the role of self-regulatory organizations, or SROs, as they are commonly known. That would give us an opportunity to respond to those who appeared before the committee and expressed their concerns with the current SRO system. The task force would work toward improving the current system, and in doing so, would instill greater investor protection and confidence in our capital market.

Later on February 24th, 2005 again you stated before the Ontario Legislature:

The committee also recommended that the government establish a task force to review the role of self-regulatory organizations. We have begun the necessary background work and will be moving forward on this recommendation later this year.

With respect to the many letters I have sent your office, in order to bring critical investor protection issues involving SROs to your attention, I only received one written response dated April 21st, 2005. I have attached that letter for your convenience.

Therein you again state,

We will be moving on this recommendation later this year.

Mr. Phillips it has now been more than 17 months since the recommendations were first tabled to the Ontario Legislative Assembly on October 18, 2004.

· Why have you apparently not acted on this all-party recommendation to date?

· When will you act?

· Who will comprise the task force if you proceed with your commitment?

· Will you include consumer/investors on that task force?

Not to act on it would not only be irresponsible, it would also be disrespectful to all Associations and individuals who participated by appearing before the Finance Committee. I do not feel that those organizations, Ontario investors, advisors, or voters will appreciate a failure to follow through – if that is what we have here.

Further, many stakeholders have intimated that they perceive the relationship between the IDA and the Ontario Securities Commission as a major stumbling block in achieving agreement on a single national regulator.

For now, a progress report and timeline to completion of the SRO review is the minimum entitlement of all stakeholders. I have copied the stakeholders listed below.